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Supreme Court puts some distance between the government and qui tam relators in False Claims Act litigation

The Supreme Court ruled today in a case involving the False Claims Act (FCA), denying qui tam relators one of the procedural benefits afforded to the federal government in FCA litigation. The Court, with Justice Thomas writing for a unanimous Court, upheld the Second Circuit's decision to dismiss an FCA appeal as untimely because it was filed 54 days after the district court dismissed the action on 12(b)(6) grounds. The crux of the Supreme Court's decision is that the government is not a "party" to an FCA action for purposes of the appellate filing deadline unless it has intervened in the case. This means that where the government has not intervened, a petitioner has only 30 days to file a notice of appeal--rather than 60 days when the government is a "party." The case is United States ex rel. Eisenstein v. City of New York, No. 08-660, 556 U.S. ___ (June 8, 2009).

On its face, the Eisenstein ruling is pretty narrow. The Court made clear that the government does not need to intervene to appeal a district court's decision to dismiss an FCA case over its objection.

The most obvious impact is that counsel for FCA defendants should review any appellate records in their cases to make sure that relators have complied with the 30 day requirement for notices of appeal where the government has not intervened. If not, the appellate courts may not have jurisdiction.

Beyond that, however, Eisenstein puts some distance between the government and relators, undercutting the notion that the relators "stand in the shoes of the government" for all purposes in FCA matters. Counsel should review any arguments by relators that they are entitled to the same standards accorded to the federal government to see whether this decision could affect that. For example, the general statute of limitations for FCA actions is 6 years, but under certain circumstances, the government has up to ten years to bring an action based on the tolling provisions of the statute. While not the same language as the appellate notice, this statutory tolling language is an area where relators have sought to take advantage of the benefit afforded to the government to extend the span of conduct at issue. The courts are mixed on whether a relator can take advantage of the tolling provisions, particularly where the government has not intervened. Today's Supreme Court decision could undercut such arguments by relators.

The Eisenstein case arose when a relator and four New York City employees filed a qui tam suit against New York City claiming that the City was depriving the United States of tax revenue by deducting a fee from the taxable income of nonresident workers. The federal government declined to intervene and the district court subsequently dismissed the action under Rule 12(b)(6). The district court concluded, among other things, that the plaintiffs (who were proceeding pro se ) failed to allege that the City engaged in conduct meeting the Second Circuit's definition of fraud and failed to allege any facts that would meet any of the elements set forth in the FCA. The plaintiffs filed a notice of appeal 54 days after the district court's decision, but the Second Circuit dismissed the appeal as untimely.